Data released by the US Treasury Department on Thursday showed that the US fiscal deficit reached $404 billion in October, widening by 42% from the same period a year earlier, as government spending rose and tax revenue fell.
The US Treasury expects the fiscal deficit to expand further to about $2.2 trillion for the full fiscal year as government spending continues to outpace tax receipts.
The data showed that in the first month of the new fiscal year that began on October 1, US government spending rose 12% year-on-year to $773 billion, while tax revenue fell 9% year-on-year to $369 billion. Among the components, tariff revenue dropped about 39% year-on-year to $19.2 billion.
The increase in government spending was mainly driven by higher outlays for national defense, healthcare, and interest payments on public debt. At the same time, refunds of tariffs and corporate income taxes increased from a year earlier, weighing on government tax revenue. However, the scale of tariff refunds has slowed somewhat since this summer.
The latest figures highlight the fiscal pressure facing the US government. With government spending continuing to exceed tax revenue and rising interest rates pushing up the cost of debt financing, the US fiscal deficit remains at a high level.
In its report, the US Treasury projected that the US fiscal deficit will reach about $2.2 trillion in fiscal year 2027, further expanding from the previous fiscal year.
In fiscal year 2026, which ended at the end of September this year, the US federal government fiscal deficit reached $1.99 trillion, equivalent to about 6% of gross domestic product (GDP).
Government spending far exceeding federal tax revenue, along with surging debt interest costs caused by rising interest rates, are the main factors keeping the fiscal deficit at a high level.
It is worth noting that US government debt interest payments already hit a record high of about $1 trillion in the previous fiscal year. As the high interest rate environment continues to push up the government's debt servicing costs, interest payments are becoming an important reason for the growing US fiscal burden.
If the US Treasury's latest forecast materializes, the fiscal deficit in fiscal year 2027 will increase by about $210 billion from the previous fiscal year, an increase of about 10.6%.
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